Banking Royal Commission

Discussion in 'Four Corners' started by The Vaulting Violinist, Feb 13, 2018.

  1. Parra

    Parra Coach

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    Fair enough to challenge the influence of the RC on home prices - take it up with the journos that wrote the articles - I've posted two of them. I can understand the premise that the uncertaintly created by the RC coupled with tighter lending practices for whatever purpose will affect property prices. Are there other factors? Sure.

    I agree that people who are living in their mortgaged property are no worse off - of course this does ignore the wider economic effects of a significant decrease in property value. You sure are affected if you don't have work. A lot of people and small business are very dependent on the property market for work and this of course has flow on effects.

    As far as blaming banks for the notion that the market is 'overheated' or that this is all some sort of ponzi scheme - this is pie in the sky stuff.

    The one segment of this market that needs consideration is what can be done for first home buyers - we have a disparity with wage levels and growth vs property prices. This RC, and a few % points off housing prices do not affect this segment at all.
     
  2. Bandwagon

    Bandwagon Moderator Staff Member

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    We are yet a long way from a significant decrease in property value, the discussion around this article is around the detrimental effects of what is at this stage a minor decrease.

    Well, fortunately I haven't "blamed" the banks for an overheated market, I noted that some lending practices have contributed to that.

    Well, the problem exists because property prices have grown faster than have wages. If property prices fall, whilst wages rise, does this not then make housing more affordable?

    Now a collapse won't help anyone, but certainly a minor correction and a bit of stagnation would help first home buyers quite a bit. If you don't believe that prices falling or remaining static whilst one saves a deposit is of any real help, well, I don't know that you understand the problem particularly well.
     
  3. Parra

    Parra Coach

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    To get some perspetive on the first home buyers dilemma put yourself in the shoes of two people earning the average wage who want to buy a house in Sydney and then look at the average house price in Sydney.
     
  4. t-ba

    t-ba Coach

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    Well jeez I would want lower house prices to make it more affordable instead of a larger loan!
     
  5. Parra

    Parra Coach

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    When the drop required is 200-300k of the average price the solution is not so simplistic.

    Of course, once you obtain a mortgage you want prices to rise.
     
  6. t-ba

    t-ba Coach

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    If I was in this circumstance, as a selfish actor keen on buying my first home I am not sure would give a shit about the consequences to other people.
     
  7. Parra

    Parra Coach

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    I agree with that sentiment. If the prices drop enough to be genuinely affordable for people on the average wage then the consequences are on everyone. Those people included.
     
  8. t-ba

    t-ba Coach

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    I'm not sure they'd care, just like people who have benefited from the myriad policies that have seen housing stock become so expensive to their financial benefits haven't really given a f**k about the consequences everyone else has faced as a result.
     
  9. Parra

    Parra Coach

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    They may have bigger problems themselves in this scenario. No job for example. If the average Sydney house price dropped by 200-300k there would be serious economic disruption.
     
  10. t-ba

    t-ba Coach

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    Chicken little thinking right there.

    If we don't keep housing unaffordable the sky will fall in!
     
  11. Parra

    Parra Coach

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    Not at all. If it becomes "affordable" in Sydney it would be evidence of bigger things at play.

    It is how you go about providing opportunity for first home buyers that is important. We can do it without crashing the housing market and the economy.
     
  12. t-ba

    t-ba Coach

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    Do go on.
     
  13. Parra

    Parra Coach

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  14. Parra

    Parra Coach

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    You disagree?
     
  15. t-ba

    t-ba Coach

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    Well I would like for you to provide examples of how this could be done rather than just a few general statements. I'm rather interested to hear how you think it can be done.
     
  16. Parra

    Parra Coach

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    I thought you were disagreeing with the idea that a big drop in property value would have significant implications.


    As far as first home buyers - the best example of assistance I am aware of in Australia was what we did for returned servicemen after WW2. Special circumstances for select people.

    There is a chance to create some new estates available for first home owners only with some proviso about how long you need to hold a property - say 10 years, following which it can go onto the open market. If you need to move/sell prior, it stays in the scheme and is available for other first buyers. So you are get a start, a price and a chance to be in the market long-term. This also isolates these estates from normal market pressure, but after a time these places enter the market - increasing overall housing stock and and entry point for first homebuyers.

    Better than chucking in 10k that just increases the price of existing property. This would isolate people from the market under specific conditions. If the conditions don't suit you - enter the normal market. It wouldn't suit everyone.
     
  17. t-ba

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    It's a point I would contend because I can't imagine that every single set of circumstances that saw a drop in housing prices relative to income would result in economic chaos.

    It's an interesting idea but seeing how long it took the Northwest to get infrastructure I'm a bit worried about having people living in a new development out past Wiseman's Ferry trying to commute to Chatswood or Parramatta, let alone the city. Where is it going to be and will the infrastructure also be in place?

    I'd have to ask you what you think would be the deleterious effects of placing, say reciprocal property ownership rights on foreign nationals (ie - They can only buy if their government allows us to buy, with obvious caveats for people holding stuff like PR) and eliminating negative gearing on old housing stock would have on the overall economy and housing prices.
     
    Last edited: Jun 10, 2018
  18. Bandwagon

    Bandwagon Moderator Staff Member

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    It doesn't need to crash, if price growth falls below interest rates, and wages growth, then getting into the market becomes more doable, because you are no longer falling behind in saving for a deposit, and you aren't going backwards year on year in terms of serviceability of the finance required
     
  19. mave

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  20. bazza

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    Anyone in the FIRE economy that is tied to rising house prices would end up with lower income if there was a large drop in house prices. Most would not have saved the excess they accumulated in the boom years to handle the bust years
     
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